Councilman: Nutter plan could give businesses ‘huge’ tax cut

By Jan Ransom, Daily News Staff Writer

Posted: May 15, 2012

COULD commercial and industrial property owners get an unintended tax break under Mayor Nutter’s plan to move to a property-tax system based on market values?

That’s a question City Councilman Bill Green raised Monday during a Council hearing in which he said that an analysis by his office found that commercial and industrial property owners could see a huge decrease in their tax bills this fall under Nutter’s proposal.

“Commercial and industrial property owners will get a huge, as far as I know, unintended decrease in taxes at the expense of residential property owners,” Green said.

Nutter has proposed shifting to a new property-tax system that would use market values, known as the Actual Value Initiative. Nutter’s plan would memorialize two tax hikes billed as temporary and also bring in an extra $94 million for the cash-strapped school district. Critics call the move a back-door tax hike, but Nutter says he’s just capturing the increase in property values.

But there is an unintended consequence, according to Green, who said that commercial properties are assessed closer to market value than many of the city’s residential properties that have been poorly assessed for years.

According to an example he provided, a commercial property with a $1 million market value would likely be assessed at about $700,000 under the current system, meaning a tax bill of $21,000. After the move to AVI, assuming a 1.2 percent tax rate is applied, that bill would drop to $12,000, Green said. The tax rate that will be used if the city goes to AVI has not yet been set.

When asked during the hearing about the potential tax-burden shift from commercial and industrial property owners to residential, Finance Director Rob Dubow said that if it were the case, “I don’t think that would be a good policy.”

Dubow said the administration’s only intention was to have accurate assessments. Dubow added that the Office of Property Assessment has been asked to examine whether commercial properties would actually experience a large decrease in tax bills.

Green proposed amendments to Nutter’s proposal that would keep AVI revenue neutral and introduced a bill to double the Use and Occupancy Tax — which applies only to commercial and industrial property owners — to raise the additional $94 million for schools.

Contact Jan Ransom at 215-854-5218 or ransomj@phillynews.com, or follow on Twitter @Jan_Ransom.